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Johannesburg – Anglo American Platinum (Amplats) [JSE:AMS] reported a loss of R1.3bn for the six months to end-June 2016. This contrasts with the R1.5bn profit reported for the same period last year.
At 11:30 the share price was trading down 2.8% at R302.80 on the JSE.
Gross sales revenue was down 11% from R30.6bn in the previous period to R27.3bn, mainly due to lower platinum group metal sales and the stronger rand, the company explained in a note to shareholders.
The rand strengthened by 14% to R13.24 to the dollar, compared to an average of R15.38/$ reported in the first half of 2016. This eroded the benefit from higher prices. The rand basket price was down 3% from R24 400, compared to R25 100 in the previous period.
Net sales revenue came to R16.7bn. Operating profit was R684m, compared to the R3bn reported in the previous period. Earnings before interest, taxation, depreciation and amortisation before impairment came to R4bn, down 26% from the R5.4bn reported in the previous period.
Headline earnings were R747m, with headline earnings per share at 285c. But a loss of 453c/share was reported, compared to a profit of 588c in the previous period.
The company chose not to declare a dividend, given the net debt position of R5.9bn and future capital funding requirements. Debt improved from R7.3bn owed at December 31 2016.
“The company has increased liquidity headroom to R16.5bn, comprising both undrawn committed facilities of R9.4bn and cash of R7.1bn and is comfortably within its debt covenants,” Amplats stated.
The company said it has “adequate” committed facilities to meet future funding requirements, with R314m committed for more than five years. Further future projects will be funded with existing cash resources, future operating cash flows, borrowings and other funding strategies.
The company reported a net cash inflow of R5.6bn for operating activities, with a net outflow of R3.9bn for investing activities and an outflow of R77bn for financing activities.
The company’s mines in Limpopo, Mogalakwena and Amandelbult, yielded the most sales at R6.45bn and R4.84bn respectively. Over R24bn worth of sales was attributed to precious metals, with Europe being the biggest market with R10.97bn worth of sales.
Base metals reported sales of over R2bn. Platinum yielded gross sales of R14.1bn, followed by palladium at R6.5bn and rhodium at R1.5bn.
The platinum price fell to $957 in the first half of the year from $971 in the first half of 2016. “The decline is partially a result of a stronger US dollar following expectations that the US Federal Reserve will increase rates in the second half of the year. This led to investment away from low-yielding commodities, including the precious metals," Amplats stated.
Future prospects
Demand from the automotive sector is expected to decline, impacting platinum demand. “Current catalyst technology means that PGM (platinum group metal) loadings are similar on conventional and hybrid vehicles, so hybridisation itself poses little direct threat to PGM demand,” said Amplats.
Battery electric vehicles are expected to increase in the market, but fuel cells could be an alternative means to electrify these vehicles. “The Chinese government has plans for a million fuel cell cars to be sold in 2030, something that could create a substantial new source of platinum demand.”
Platinum jewellery sales are expected to fall, particularly in the Chinese market, but there may be potential for growth in other markets such as India.
“Industrial demand for platinum remains strong and has grown since 2016. The chemical sector continues to be a major purchaser of platinum for use as a clean catalyst in the manufacture of many basic chemicals,” said Amplats.
Capital expenditure is expected to remain between R3.7bn and R4.2bn for the remainder of the year.
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